Democrats and Republicans Close Ranks Behind Tax Plan to Boost Economic Growth and Restore Fairness to the System

 125,000 low-income filers taken off tax rolls, impacts 300,000 Kentuckians

             Frankfort, KY:  Governor Ernie Fletcher was joined by a bipartisan group of state lawmakers today to unveil a sweeping plan for stimulating the state's economy and creating jobs by modernizing the tax system.

            The plan, called Jobs and Opportunity Bipartisan Solution for Kentucky (JOBS for Kentucky), is a revenue-neutral approach to tax modernization that reduces marginal tax rates and expands the tax base.  It eliminates or reduces income taxes for hard-working Kentuckians, raises cigarette taxes and dramatically overhauls the state's business tax structure. 

            Corporate taxes would be changed to broaden the base of businesses that pay taxes.

            "JOBS for Kentucky" stimulates job growth, eliminates unfair preferential treatment for out-of-state companies, and makes the system easier to manage and more reliable in forecasting revenues. 

             "Kentucky has been suffering from a growth deficit for too many years because our current tax system makes it impossible to compete with other states," said Gov. Fletcher.  "We have been penalizing job creators for setting up shop here and at the same time rewarding businesses for being based in other states." 

            The governor anticipates the plan will attract new businesses to Kentucky and create approximately 7,000 new jobs over the next two years.  These jobs are in addition to jobs resulting from normal economic growth.

            Gov. Fletcher stressed that the bipartisan plan is designed to encourage growth without raising taxes.

             "This is a rational and equitable plan that promotes competitiveness, growth, opportunity, and fairness for business and individuals," Gov. Fletcher said.  "It is designed to keep and attract our most educated and skilled workers, while providing an even playing field for businesses.  It provides Kentuckians with a three-day holiday from sales taxes at the start of every school year.  The plan fulfills a campaign promise I made to the people of Kentucky to change the tax system so we can fix our economy and grow jobs without increasing taxes.  And it is a plan I expect the Legislature to approve this spring so we can get our state moving again."

            Lawmakers from both parties joined the governor at the press conference, including the Republican sponsor of the bill in the House, Rep. Scott Brinkman (Louisville), and the Democratic sponsor, Rep. Robert Damron (Nicholasville). 

            Senate President David L. Williams (R-Burkesville) also stood with the governor in support of the bipartisan tax modernization plan.

            "As a member of the Appropriations and Revenue Committee, I recognize we have to address tax modernization to stop further eroding of our revenue base," said Rep. Damron. "If we don't do this we simply cannot meet the needs of our education system and basic human services needs.  While this plan is revenue neutral, it stops the hemorrhaging of our current revenue base, and we hope it will grow jobs and raise the standard of living for the people of Kentucky.  I commend Governor Fletcher for reaching out to Democrats and agreeing to address many of our concerns as we have developed this plan over the past three weeks."

            Rep. Mike Weaver (D-Elizabethtown) added, "It is time to work in a bipartisan way to do something for the Commonwealth of Kentucky. This is about jobs and treating people fairly. We fully understand there is a political risk involved in what we're doing, but the benefits for the state far outweigh any political considerations."

            The governor said that the sweeping reforms to the state's corporate tax code make the state more attractive to businesses while also making the system more equitable.

             "This plan means businesses will no longer be penalized for being based here and that companies will not be rewarded for being based in another state," Fletcher said.  "Communications taxes will be simplified to make it easier to collect, and changed to make sure the taxes are applied uniformly."

              Grover Norquist, who as president of Americans for Tax Reform created the "No New Taxes" pledge that was signed by the governor and many state legislators, said: "I would like to commend Governor Fletcher on reducing marginal tax rates to make Kentucky's businesses more competitive as well as resisting the demands of special interests to increase taxes.

The plan's highlights include the following:

•             Removing from the income tax rolls any family with income at or below $12,000, taking 125,000 filers off the tax rolls and impacting approximately 300,000 Kentuckians 
   
• Reducing the top tax rate from 6 percent to 5.68 percent, providing an income tax reduction for every working Kentuckian.  In future years, the tax rate will drop to as low as 4 percent as growth in state revenues and jobs reach specific triggering targets.
   
• Providing a three-day sales tax holiday prior to the beginning of the school year, during which all purchases of clothing, school supplies, and computers would be exempt from sales and use tax.
   
• Repealing the corporate license tax, rendering moot the Illinois Tool Works decision.
   
• Reducing the maximum corporation income tax rate from 8.25 percent to 6 percent, going from among the highest to one of the lowest in the region.
   
• Setting a new cigarette tax of 29 cents per pack, an increase of 26 cents.
   
• Imposing a statewide lodging tax of 1 percent of the room charge to fund tourism, meeting and convention development initiatives.  This will be a dedicated reserve fund that can only be used for tourism and convention initiatives.  It will not be used for any general-fund programs. 
   
• Creating a new tax incentive program to improve the Enterprise Zone program that is expiring over the next few years.
   
• Exempting income received in a federal tobacco buy-out or buy-down program.
   
• Broaden corporate tax base to cover limited liability entities.  
   
• Exempting intangible personal property from state taxes.
   
• Revising the annual procedure for setting the state real property tax rate to replicate the local government procedure.
   
• Eliminating all excise taxes on alcohol and the case tax on alcohol beverages and replacing them with a revised wholesale tax, which will increase the cost of a 12-pack of beer by less than a nickel.
   
• Establishing a new broad-based communications excise tax on cable and " for the first time satellite television providers " at 7.62 percent, replacing myriad state and local taxes.  Also included are all telephone services (wireless and land-based).
   

             "Some people mistakenly think tax modernization is just another way to raise revenues through tax increases," said Gov. Fletcher. "Let me be clear: Any growth in revenue for the state will result from economic growth and creation of new jobs, not higher taxes."

# # #